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Savings accounts will earn interest on the amount of money deposited into the account. The formula to calculate simple interest in a savings account is the deposit amount times the annual interest rate times the amount of time the money is deposited. Calculating the interest on a savings account will show the small business how much money it will earn on the deposit. As an example, Firm A deposits $1,000 in a savings account. The savings account earns 5 percent interest per year. Firm A keeps the amount in the bank for six months.

1.

Determine the deposit amount, the amount of time the deposit earns interest and the time the deposit will earn interest. In the example, the deposit amount is $1,000, the interest rate is 5 percent and the time is half a year.

2.

Convert the time the deposit earns interest into a fraction. In the example, half a year is six out of 12 months, which equals 0.5.

3.

Multiply the deposit amount by the interest rate by the period of time the deposit earns interest. In the example, $1,000 times 5 percent times 0.5 equals $25.

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About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.